In September, South Korea achieved its highest semiconductor exports in the past year, while exports to China also reached their peak for the year. Analysts suggest that semiconductor exports have gradually found their footing and are on an upward trajectory, and exports to China have entered a significant recovery phase.
The Ministry of Trade, Industry, and Energy (MOTIE) announced on Oct. 1 that South Korea’s exports for September amounted to US$54.66 billion, a 4.4 percent decrease compared to the previous year. Imports also saw a 16.5 percent decline, reaching US$50.96 billion. South Korea’s exports have been declining year-on-year since October of last year, spanning 12 consecutive months. However, the rate of export decline in September dropped to single digits for the second consecutive month, marking the lowest level in a year. Semiconductor exports reached US$9.9 billion, the highest in a year, with a modest 13.6 percent decrease from the previous year’s US$11.5 billion. Exports of IT products, including semiconductors, increased, leading to an expansion in exports to China, which reached the highest level of US$11 billion (14.97 trillion won) for the year.
The trade surplus, which represents the difference between exports and imports, achieved a historic peak of US$3.7 billion (5.04 trillion won) in September. This figure stands as the largest surplus recorded in two years since September 2021. South Korea has maintained a trade surplus for four consecutive months since June. This is attributed to a 36 percent reduction in energy imports due to declining international prices of oil and natural gas. MOTIE Minister Bang Moon-kyu said, “Despite uncertain external conditions such as the global high-interest rate environment, China’s economic slowdown, and supply chain reconfigurations, our exports are continuing to improve, signaling a turning point toward positive growth.”
As semiconductor exports for September approached nearly US$10 billion, exceeding expectations, there is growing consensus that the semiconductor industry has hit its low point and entered a turnaround phase. Semiconductor exports had been declining since October the previous year, falling below the US$10 billion mark due to shrinking demand from a global economic slowdown and plummeting prices. In particular, exports in January and February dropped by over 40 percent compared to the previous year, hovering around US$6 billion and adversely affecting overall exports. However, following a recovery in August with exports reaching US$8.6 billion, the positive trend continued into September, leading to a growing consensus suggesting that the industry has indeed hit its bottom.
As semiconductor exports continue to rise, exports to China, which is another significant contributor to South Korean exports, is also showing signs of recovery. In September, exports to China amounted to US$11 billion, marking the largest volume this year despite a 17.6 percent decrease. The trade balance with China, which had been in deficit since October of last year, also recorded its smallest deficit of just US$100 million in the past year. An official from the MOTIE stated, “Exports of IT products, including semiconductors, which account for 30 percent of China’s exports, as well as smartphone displays and camera modules showed positive performance.” Additionally, the manufacturing industry’s Purchasing Managers’ Index (PMI), which reflects the sentiment of Chinese companies, reached 50.2 in September, surpassing the 50 mark for the first time in six months. PMI values above 50 indicate economic expansion, while values below 50 signify contraction in economic activity.
While semiconductors and China, the two main drivers of South Korea’s exports, show signs of recovery, exports of five key items have increased compared to the previous year: automobiles are up 10 percent and have seen growth for 15 consecutive months, ships are up 15 percent, steel is up 7 percent, displays are up 4 percent, and home appliances are up 8 percent. This raises the possibility of a positive turnaround in exports in the fourth quarter when compared to the previous year. In addition, exports of petroleum products, down 7 percent, and petrochemicals, down 6 percent, decreased by single digits in September.
Exports to the United States, up 9 percent, and the European Union, up 7 percent, continued to grow for two consecutive months, reaching their highest levels ever recorded for the month of September. In addition, exports of semiconductors, petroleum products, and home appliances in September also achieved their highest figures so far this year. However, some caution against premature optimism. Cho Sang-hyun, director of the International Trade and Commerce Research Institute at the Korea International Trade Association, pointed out, “There are still concerns about an economic slowdown. It is more appropriate to consider this as a phase where exports are confirming their bottoms.”